Telefónica prepares for life without O2

Telefónica has published its Q1 results that according to its CEO represents “a solid beginning” to the year and reflects “the improved organic evolution of the business”. It reported customer growth in all its business units and the total is now more than 319 million, up 10 per cent year-on-year. Specifically, its fibre-based broadband subscribers doubled year-on-year to 2.1 million, matched by a similar increase in Pay TV customers to 5.5 million. In mobile, its LTE customer base increased fivefold to 13.7 million and it reported an increase in smartphone users of 57 per cent to reach 91.4 million.

In terms of financials, revenue was up 12.6 per cent to €11.5 billion in the quarter, although operating income was down 5 per cent at €3.6 billion. Telefónica’s UK O2 business, which is soon to be owned by Hutchison Whampoa, is classified as “discontinued”, yet generated €1.3 billion of net profit, in sharp contrast to the mere €479 million is “continuing” businesses generated. What O2’s revenues were in the period was not revealed.

In other country highlights, Telefónica España still relied heavily on its fixed-line business, which reported €2.1 billion of revenues in Q1, whereas its mobile business reported €1.0 billion. Total revenues and operating income were both down on Q1 2014. It says it is now the operator with the most extensive fibre network and the most connected customers in Europe, with 1.6 million subscribers.

In Brazil, revenue grew 4.8 per cent year-on-year and its the share of the mobile market increased by 28.9 per cent to 81.9 million customers, although 53.0 million of these are on prepay. In Germany, revenue improved 69.4 per cent year-on-year, and the telco now has 42.2 million mobile customers.

Other details reveal that at the end of March, 40 per cent of Telefónica’s group revenues from mobile services came from mobile data, which increased by 31 per cent year-on-year. The group's investment increased by 25.8 per cent in the first quarter to €1.7 billion, which includes €61 million of spectrum spending, mainly in Ecuador. The main use of the investment was focused on modernisation and acceleration of the deployment of new networks.

Digital Services accelerated its revenue growth by 33.7 per cent from Q1 last year to €682 million. The telco’s video business revenues amounted to €321 million of that figure, driven by a 53 per cent increase in subscriber numbers. M2M revenues during the first quarter reached €37 million off the back of 8.0 million connections, while Cloud business revenues reached €83 million.

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